TO THE MEMBERS
COMFORT INTECH LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Comfort IntechLimited ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss statement of changes in Equity and the Statementof Cash Flows for the year ended on that date and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the financial statements"). In ouropinion and to the best of our information and according to the explanations given to usexcept for the effects of the matter described in Basis for Qualified Opinion section ofour report the aforesaid standalone financial statements give the information required bythe Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards and other accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2019 the loss changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
The Company has not provided for defined benefit obligation in the nature of gratuitybased on the requirement of Ind AS 19 i.e. "Employee Benefit" which requiresdefined benefit obligation to be recognised based on actuarial valuation basis. In absenceof valuation we are unable to quantify the impact of above on the net profit for the yearand liabilities as on reporting date.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified opinion on the financial statements.
Emphasis of Matter
We draw attention to Note No 31 to the financial statements regarding the Company notbeing able to recover a loan from the legal heir of one of the borrower the outstandingamount as on 31st March 2019 being 19.78 Crores. The borrower had pledged shares of listedcompany against the said loan. A part of the pledged securities for this loan are lying inone of the demat accounts of the company which due to some reason has been freezed by astatutory authority and the company cannot trade in the shares lying in that account.Total market value of the pledged shares is Rs.14.73 Crores as on 31.03.2019. No provisionhas been made for the shortfall in security value as Management of the company is of theopinion that market value of the shares is much below than its book value and decline inmarket value is temporary due to adverse market scenario. Management is confident ofrecovering the entire loan amount. Our opinion is not qualified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Financial Statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Standalone Financial Statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Standalone Financial Statements.
|Key Audit Matters ||How our audit addressed the key audit matter |
|A. Impairment of Financial Asset due to Non Recoverability of Loan from the legal heir of one of the borrowers || |
|The Company is not being able to recover a loan from the legal heir of one of the borrower the outstanding amount as on 31st March 2019 being 19.78 Crores. The borrower had pledged shares of a listed company against the said loan. A part of the pledged securities for this loan are lying in one of the demat accounts of the company which due to some reason has been freezed by a statutory authority and the company cannot trade in the shares lying in that account. Total market value of the pledged shares is Rs. 14.73 Crores as on 31.03.2019. ||1. We read and assessed the Company's accounting policies for impairment of financial assets and their compliance with Ind AS 109 |
| ||2. We evaluated the management's reasonableness for not making provision in the books of accounts for the shortfall in the value of security. |
|The Company has not made impairment provision for the shortfall in security value in its books and has not booked interest on the loan amount as well. In the opinion of the management the diminution in the market value is only temporary as and when the above said freeze is lifted the company is fully confident of recovering the entire loan and interest outstanding thereon. Also the book value of per share as per the recent balance sheet of the company whose shares are pledged is much higher than the market value. The management therefore has decided that presently no provision is required for any shortfall in security and interest outstanding on the said loan shall be accounted on as and when recovered. Shortfall in recovery of principal amount if any shall be adjusted on sale of the invoked shares. ||3. We have further assessed the financial statements of the company whose shares are pledged. |
|B. Amount advanced to Associate Company || |
|The management of Company wanted expands considering and has idea to venture into the business of Indian made foreign Liquor. Having the funds available for the expansion the management has proposed for investing and providing funds to its Associate Company- Liquors India Limited who is in the same line of business and has ideal capacity to develop the market for the Indian made foreign liquor brands. Accordingly vide Memorandum of Understanding (MOU) dated April 20 2018 both have agreed that Company will provide the funds to associate in the range of 15-20 crore for development of the brands. Once the brands get developed they will get transferred in the name of the Company and company will enter into sub lease/bottling agreement for the said brands with associate and will starts selling the liquor in its Name. Associate company will use its ideal capacity for the bottling and funds advanced for development will be adjusted against the bottling charges considering the offtake of cases over a period of time. ||1. Examining the MOU entered by the company with the associate company. |
| ||2. Discussion with the management for understanding the utilization of advances by the associate company. |
| ||3. Studied the management projection towards the cash flow that would be generated from Bottling contract to Associate from which advances will get repaid |
|Also amount receivables from the sale of liquor of aforesaid brand prior to entering into the sublease/bottling agreement will be paid back to company. Upto 31st March 2019 company has advanced total amount of Rs.1588.50 Lakhs for the said business purpose and has entered into sublease agreement on April 01 2019. Company has got FSSAI license in its name after the balance sheet date. An amount of Rs.240 Lakhs has been received from Associate towards receivable of the aforesaid brands upto date of signing of Financial statements. || |
Responsibilities of Management for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under Section 133 of TheAct read with Rule 7 of the Companies (Accounts) Rules 2014. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including the Statement of CashFlow dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with the Accountingstandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 except as described in the Basis for Qualified Opinion paragraph.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
I. The Company has disclosed the impact of pending litigations on its financialstatements. Refer Note 28 to financial statements.
II. According to the information given to us the company has not entered into anylong-term contracts including derivative contracts.
III. There has been no delay in transferring any amount to be transferred to InvestorEducation and Protection fund by the Company.
|For A.R. Sodha & Co. |
|Chartered Accountants |
|FRN 110324W |
|A.R. Sodha |
|M No.031878 |
|Place : Mumbai |
|Date : 20th May 2019 |
ANNEXURE A TO AUDITORS'S REPORT
On the basis of such checks as we considered appropriate and in terms of informationand explanations given to us we state that:
1. a. The Company has generally maintained proper records of fixed assets showing fullparticulars including quantitative details and situation of fixed assets.
b. According to information given to us fixed assets have been physically verified bythe management at reasonable intervals and no material discrepancy was noticed on suchverification.
c. According to the information and explanation given to us and on the basis of recordsfurnished before to us the title deeds/ownership documents of the immovable propertiesare held in the name of the company.
2. a. The stock in trade of shares and securities held in the physical format has beenphysically verified and those held in dematerialized format have been verified from therelevant statements received from the depositories during the year by the management.Inventories of finished goods have been physically verified by the management atreasonable intervals.
b. In our opinion and according to the information and explanations given to us theprocedures of physical verification of shares and securities and goods followed by themanagement are reasonable and adequate in relation to the size of the company and thenature of its business.
c. In our opinion and on the basis of our examination of the records the Company isgenerally maintaining proper records of its inventories. No material discrepancy wasnoticed on physical verification of stock of shares and securities and goods by themanagement as compared to book records.
3. According to the information and explanation given to us and on the basis of recordsfurnished before us company has granted unsecured loans to one party covered in theregister maintained under section 189 of the Companies Act 2013.
a. The terms and conditions of the grant of such loan are not prejudicial to theinterest of the company.
b. According to information and explanation given to us the loan is repayable on demandand has been repaid as and when demanded. Interest has been served on a regular basis.
c. Loan has been repaid as and when demanded and hence there is no overdue amount.
4. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has complied with the provisions ofsection 185 and 186 of the Companies Act 2013 with respect to the guarantees andsecurities given. However the company has not given any given any loan or made anyinvestment under section 185 and 186 of the Companies Act 2013.
5. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has not accepted any deposits within themeaning of section 73 to 76 from public during the year. Accordingly clause 3(v) ofCompanies (Auditor's Report) Order 2016 is not applicable.
6. According to the information and explanation given to us the Company is not requiredto maintain cost records as specified under section 148 sub-section (1) of the CompaniesAct 2013. Accordingly clause 3(vi) of Companies (Auditor's Report) Order 2016 is notapplicable.
7. a. The company is generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income Tax Sales Tax Goods andService Tax Cess and any other statutory dues except delays in the payment of TaxDeducted at Source Goods and Service Tax. No undisputed statutory dues as stated above isoutstanding as at 31st March for more than six months from the date they become payable.
b. According to information and explanation given to us there are no disputedstatutory dues relating to Income Tax Sales Tax Custom Duty Excise Duty Cess Goodsand Service Tax or any other statute except as stated below:
|Name of statute ||Nature of dues ||Year(s) to which it pertains ||Amount Not Paid (Rs. in Lacs) ||Forum where dispute is pending |
|Income Tax Act1961 ||Income Tax Demand ||A.Y.2011-12 ||275.89 Lakhs ||Commissioner Of Income Tax (Appeals) |
8. According to the information and explanation given to us and records examined by usthe Company has not defaulted in repayment of dues to any financial institution or bank asat the Balance Sheet date.
9. According to information and explanation given to us and records examined by us thecompany has neither raised any money by way of public offers nor raised any term loanduring the year. Accordingly Clause 3(ix) of Companies (Auditor's Report) Order 2016 isnot applicable.
10. During the course of our examination of the books and records of the companycarried out in accordance with generally accepted auditing practices in India andaccording to the information and explanation given to us we have neither come across anyinstance of fraud on or by the company noticed or reported by its officers or employeesduring the year nor we have been informed of such instances by the management.
11. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided managerialremuneration in accordance with the requisite approvals mandated by the provisions of theSection 197 read with Schedule V of the Companies Act 2013.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. According the clause 3(xii) of Companies (Auditor'sReport) Order 2016 is not applicable.
13. According to the information and explanation provided to us and based on ourexamination of the records of the Company the transaction with the related parties are incompliance with section 177 and 188 of Companies Act 2013 where applicable and thedetails of such transactions have been disclosed in financial statements as required bythe applicable Accounting Standards.
14. According to the information and explanation provide to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly the clause 3(xiv) of the Companies (Auditor's Report) Order 2016 isnot applicable.
15. According to the information and explanation provided to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransaction with directors or persons connected with him. Accordingly clause 3(xv) of theCompanies (Auditor Report) Order 2016 is not applicable.
16. The Company was registered as a NBFC Company under section 45-IA of the ReserveBank of India Act 1934. Reserve Bank of India vide its order dated 24th September 2014had cancelled the certificate of registration issued to the company. Subsequently theCompany challenged the order of the RBI in the Appellate Authority Ministry of Finance.However the Appellate had upheld the order of the RBI vide its order dated 30th November2015. Thereafter the Company left with no option had filed a writ petition in the Hon'bleDelhi High Court challenging the orders of RBI and
Union of India. On hearing the Hon'ble High Court was pleased to set aside the Ordersbeing the Order passed by RBI dated 24th September 2014 and the Order passed by Union ofIndia dated 30th November 2015. However the Hon'ble High Court had granted the RBIliberty to grant the company a fresh hearing. Accordingly the RBI had conducted a hearingand the Company had made its submissions to the RBI during the hearing. However the RBIhas again passed an Order dated 28th September 2016 cancelling the Certificate ofRegistration as NBFC. On receipt of the Order the Company had again approached theAppellate Authority Ministry of Finance. The Appellate Authority vide its order dated14th February 2019 has rejected the appeal filed by the company. The Company is in theprocess of filing a Writ petition for the aforesaid matter. However considering thepresent asset and income pattern the company is not require to hold certificate ofregistration under 45-IA of the Reserve Bank of India Act 1934.
|For A.R. Sodha & Co. |
|Chartered Accountants |
|FRN 110324W |
|A.R. Sodha |
|M No.031878 |
|Place : Mumbai |
|Date : 20th May 2019 |
ANNEXURE B TO AUDITORS'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ComfortIntech Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting.
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.
|For A.R. Sodha & Co. |
|Chartered Accountants |
|FRN 110324W |
|A.R. Sodha |
|M No.031878 |
|Place : Mumbai |
|Date : 20th May 2019 |